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23 November 2008 @ 11:50 am
Monetary Policy is slow  
Global marketplace development and liberalization are products of the expanded access and integration of moore's law advancing business networks to Credit derivatives leveraging opportunities.

The economic advancement of the underclass through public and private sector home ownership initiatives was undermined by:
1) the price inflation resulting from the competitive scarcity of raw materials
a) The speed of interfaced integration of the financial networks saturated the market too quickly with virtual fortunes that were not capable of attaining materialilty
(1)because the scope of monetary policy is a slow to evolve process that does not act until the consequences of the unforeseen flaws allow those flaws to be identified and then corrected through the legislative and regulatory process.
(2) by 2004 all domestic borrowing was subprime because there was not enough bricks to support borrowing costs
(a) http://andyadkins.livejournal.com/213573.html

"Two decades ago subprime borrowers would typically have been denied credit, as lenders were restricted by usury laws that prevented them from charging rates high enough to compensate them for the risk. However, the adoption of the Depository Institutions Deregulatory and Monetary Control Act in 1980 eliminated rate caps and made subprime lending more feasible for lenders." (A Short History of Subprime ByWhite, Brenda B)

The Tax Reform Act of 1986 eliminated interest deductions on consumer and auto loans while allowing interest deductions on mortgage debt. The Act's Mortgage deduction tax reform made mortgage debt into a more attractive source of financing.

These legislative reforms encouraged the development of technologies enabling lenders to deliver risk-adjusted pricing rather than shut the door on higher-risk mortgage borrowers altogether.

By the mid-1990s subprime lending gained traction, even though their defaults were 6 times the national average. The marketplace possessed enough real liquidity to lift a the vast majority of subprime borrowers out of poverty. That is, until 2004 when all subsequent borrowing (bonds included.... state and municipal investment financing strategies are an Important aspect of the Problem) required uninterruptable borrowing privileges to ensure that borrowers could keep payment schedules.

As an errant fix, balloon mortgages were introduced into the house flipping real estate boom. Many borrowers (from all walks of Life) were trapped deadfooted by the collapse of the real estate market with these time-bomb mortgages as the liquidity crisis became fiscally apparent.